Market Wrap
Narratives
Our rates strategists expect nearly $2 trillion of Treasury issuance in calendar year 2023, with $1.6 trillion of issuance already completed through September. Treasury issuance during calendar year 2022 totaled $1.4 trillion. This increasing issuance alongside quantitative tightening has led investors to worry about a supply/demand imbalance in Treasury bonds. However, Treasury yields are likely to remain contained given the attractive risk/reward of owning a “risk free” asset yielding well in excess of the economy’s potential growth rate. Of course, lower bond yields — whatever the cause — are bullish for equities at this juncture — David Kostin, Goldman Sachs
Week Ahead
In the upcoming week, investors will be closely monitoring key speeches by several Federal Reserve policymakers to assess the potential trajectory of monetary policy in the coming months.
Simultaneously, the third-quarter earnings season is in full swing, with anticipated reports from major companies, including Bank of America, Goldman Sachs, American Express, Morgan Stanley, Johnson & Johnson, Procter & Gamble, Netflix, Tesla, AT&T, Blackstone, Philip Morris International, Taiwan Semiconductor Manufacturing, Intuitive Surgical, and SLB.
Turning to economic data, retail sales in September is expected to have grown by 0.2% last month, a slight slowdown from the 0.6% increase in August. Industrial production is also noteworthy, with expected growth of 0.1%, down from the 0.4% recorded in the previous period. The housing sector will be scrutinized as well, with attention on building permits and housing starts, and existing home sales. Additional data to follow includes business inventories, overall capital flows, the NAHB Housing Market Index, NY Empire State Manufacturing Index, and the Philadelphia Fed Manufacturing Index - Trading Economics
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Earnings
Metric | UpDn | This Week | Prior Week | Baseline | Baseline TF |
---|---|---|---|---|---|
Forward 4-qtr Estimate | ⚪️ | 239.93 | 239.93 | 228.39 | January 1, 2023 |
Forward 4-qtr PE | ⚪️ | 18 | 18 | 17.2 | January 1, 2023 |
Nominal Earnings Yield | 🔴 | 5.53 | 5.55 | 5.86 | January 1, 2023 |
Options
Metric | UpDn | This Week | Prior Week | Net CHG | % CHG |
---|---|---|---|---|---|
SPX Implied Volatility | 🔴 | 14.61 | 15.4 | -0.79 | -5.13% |
SPX GEX Flip | 🔵 | 4,362.5 | 4,357.5 | 5 | 0.11% |
SPX Skew Adjusted GEX | 🔵 | -351,112,632 | -3,214,285,886 | 2,863,173,254 | 89.08% |
Equity Put/Call Ratio (CBOE) | 🔵 | 0.7 | 0.68 | 0.02 | 2.94% |
VIX Put/Call Ratio (CBOE) | 🔵 | 0.58 | 0.52 | 0.06 | 11.54% |
SPX/W Put/Call Ratio (CBOE) | 🔵 | 1.69 | 1.23 | 0.46 | 37.4% |
Futures
Friday's E-mini S&P 500 market was lower with the Dec contract lower by 23.25 to 4357.25, a one week low. Total volume was a heavy 2,162,184, with the Dec contract seeing 2,159,101 done. Combined open interest rose by 15,887 (0.77%), with Dec adding 15,856, or 0.77%, to 2,069,865.
Option trading centered around the Oct EW3 100 calls with 7,152 traded and the Oct E3A 3500 puts with volume of 74,053. Option open interest is greatest for the Oct EW3 100 calls at 36,744, and the Oct E3A 3500 puts at 85,674.
E-mini S&P 500 implied volatility finished the session sharply higher as the 30-day at-the-money added 1.46% to close the day at 15.62%, a one week high. The 30-day historical volatility finished gaining 0.0273% to 11.67%. The 30-day 25-delta Risk Reversal ended the day sharply down, off 0.97% to settle at -4.67%, a one month low.
Bull v Bear
This Week (30d ATM IV 15.62% v 30d RVOL 11.67%)Bulls will seek to recapture 4400 and ideally WHI/50d MA 4431 (+1.68%) on a closing basis. Upside: +1σ (W) 4458 (+2.31%). 4500 is below +2σ (W) 4560 (+4.65%).Bears will seek to break below 4300 (-1.31%) on a closing basis. Downside: 200d MA 4265 (-2.12%) is within -1σ (W) 4261 (-2.21%); WLO.1 4235.50 (-2.79%); 4200 (-3.61%).
Last Week (4341.50 DEC23 -0.01%)Bulls will seek to break HH 4371.25 (+0.69%) on a closing basis. Upside: Recapture 4400 is within +1σ (W) 4432 (+2.08%). 50d MA 4455 (+2.61%) < +2σ (W) 4523.50 (+4.19%).Bears will seek to recapture 4300 (-0.96%) on a closing basis. Downside: WLO 4235.50 (-2.44%) is beyond -1σ (W) 4254.50 (-2.00%). 4200 (-3.26%) > -2σ (W) 4168 (-4.00%).
Indicators
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